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Monthly Archives: October 2014

India has dropped down two places to stand at 142nd out of 189 countries ranked by the World Bank for ease of doing business, underscoring the tough task that lies ahead of the Narendra Modi government, which has said it wants to make India a business-friendly country.

In the ten metrics used to measure ease of doing business in the Bank’s 2015 report, which covers the period from June 2013 to May 2014 (when the UPA was in power), India came close to the bottom in two categories. It stood a wretched 184th in the category “Dealing with Construction Permits,” and 186th in “Enforcing Contracts.”

On the bright side, India stood 7th, an improvement of 14 places, when it came to “Protecting Minority Investors.” It is the only category in which India has shown an improvement from 2013, when it was ranked 21 in this category and 140 in the overall ease of doing business.

Getting construction permits in India involved an average of 25 procedures that took 186 days, and cost 28 per cent of the warehouse value. Enforcing contracts took 46 procedures and 1420 days — nearly four years. Getting electricity took 106 days and registering a property took 47 days.

Indicators measured in Mumbai, India’s business epicenter, showed that it required 13 procedures to start a business, and it took 30 days to accomplish this, compared to an average of 4.8 procedures and 9.2 days in advanced economies.

The Modi government, which aggressively made ease of doing business part of its agenda and has already initiated some steps, has plenty to chew on in the report that chronicles how enervating it is to start a business in India. For instance, it takes five days to pay stamp duties online, file all incorporation forms and documents online and obtain the certificate of incorporation and five days to request and obtain Certificate to Commence Operations.

It takes between a week and 12 days for each of the following procedures: Obtain a Permanent Account Number (PAN) from an authorized franchise or agent appointed by National Securities Depository Services Limited (NSDL) or Unit Trust of India (UTI) — 7 days; Register with Employees’ Provident Fund Organization — 12 days, simultaneous with previous procedure: Register for VAT online — 10 days, simultaneous with previous procedure; Register for medical insurance (ESIC) — 9 days, simultaneous with previous procedure; Obtain a tax account number for income taxes deducted at source from the Assessing Office in the Mumbai Income Tax Department — 7 days.

All of India’s neighbors except for Bangladesh (173) and Afghanistan (193) were ranked higher. China topped the neighborhood at 90, followed by Sri Lanka at 99, Nepal at 108, Bhutan at 125 and Pakistan at 128. Singapore stood first overall for the ninth year in succession, and is followed by New Zealand, Hong Kong, Denmark, and South Korea.

Samsung Electronics Co Ltd said on Monday that it will cease its light emitting diode (LED) lighting business outside of South Korea, scaling back what was identified as a key growth business four years ago.
LED, rechargeable cells for hybrid electric cars, solar cells, medical devices and biopharmaceuticals were five areas singled out by the Samsung Group in 2010 as new growth drivers for the conglomerate.

At the time, the group forecast the businesses would generate 50 trillion won ($47.5 billion) in annual revenues by 2020 for its affiliates including Samsung Electronics.

But Samsung Electronics has struggled to gain traction in the LED lighting market, failing to loosen the grip of established rivals such as Philips and Osram in advanced markets while facing mounting margin pressures from Chinese competitors in emerging markets.

“We will remain active in the LED industry through our LED component business,” Samsung Electronics said in an emailed statement, adding that it will focus on areas such as backlighting for displays of consumer products like televisions.

Samsung Group affiliates have seen limited returns so far from the five new growth areas.

While Samsung SDI Co Ltd is supplying German premium automaker BMW with electric vehicle battery cells, Samsung companies have struggled to generate significant revenues form other businesses such as solar cells.

Analysts and investors have said developing or identifying new growth drivers will be a key test for Jay Y. Lee, heir-apparent of Samsung Group, as his father, group patriarch Lee Kun-hee, remains hospitalised following a May heart attack.

A Samsung Electronics spokeswoman said the revenue contribution of LED lighting to the company had been small. She declined to give specific figures.

NEW DELHI: A small change in foreign investment rules-by doing away with minimum 51% holding by a single Indian entity in a defence venture-has helped Mukesh Ambani’s Reliance Aerospace and Punj Lloyd bag licences that they had been waiting for. While increasing the foreign direct investment (FDI) cap for defence to 49%, the government did away with the clause that had been in the policy for years, as part of a strategy to attract investment in local manufacturing units. In special cases, 100% FDI has been allowed. The earlier rule did not allow Reliance Aerospace to get the licences to manufacture weapon launchers for combat aircraft as the promoters hold 45.3% in Reliance Industries. Similarly, the promoters of Punj Lloyd together have a 37% stake, which restricted a wholly owned subsidiary’s ability to bag licences to manufacture torpedoes, rocket launchers and combat vehicle, sources familiar with the development.

While the government did not disclose any details, an official statement said that a committee had cleared 19 proposals from several large Indian corporate houses – including the TATA, Mahindra and Bharat Forge – to bag licences for defence manufacturing.

In at least 14 other cases, the government has informed companies that licences are no longer required. These included Tata Advanced System’s proposal to manufacture aircraft and spacecraft components, Mahindra Aerostructure, which wants to make parts of aircraft and Reliance Aerospace’s flight control system manufacturing plans. Even before FDI rules were changed, the department of industrial policy and promotion had reduced the number of items in the defence sector that need licences and freed dual-use items, such as radars and aircraft components that have civilian use too, from licensing requirement.

For years, the defence ministry has frowned upon the entry of the private sector into the arena even as it had relied on imports, often involving middlemen. In fact, during UPA’s term in office, the commerce and industry ministry’s plea to increase the FDI cap for the sector was repeatedly blocked by A K Antony, the then defence minister. In recent months, however, the mood has changed as the department of defence production has backed private and foreign capital in local ventures.

Now, the government is working on further easing the rules, including doing away with annual capacity ceiling in industrial licences and also permit of sale of licensed items to other entities under the control of the home ministry, state governments, PSUs and other valid defence licensed companies without approval.